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A comparison of minority shareholders’ remedies in British Columbia and Bhutan Tshering, Norbu

Abstract

Minority shareholders investing their capital in business corporations face two primary risks. First, the business risk of the undertaking common to all investors, and second, the risk of disagreements within the corporate organization when their situation may be weaker compared to the majority shareholders. The interests of minority shareholders are often been made virtually worthless by the machinations of those in control of the corporation. Minority shareholders can be deprived of any income from the corporation, either in the form of dividends or salary, or they may be excluded from any effective voice in business decisions and denied information about corporate affairs. Often, they can eventually be ousted from the corporation and receive only a fraction of the real value of their interests. Conflicts of interests amongst shareholders constitute a serious threat to the success and survival of the corporation. In the absence of protective mechanisms, control is usually in the hands of the majority shareholders. While remedies do exist in the law (common law) for unexpected problems, contractual mechanisms stipulated at the inception of the corporation and market forces may also reduce the possibility of conflicts of interests arising in the course of carrying on the corporate business. The common law or even detailed mechanisms and prevailing market forces cannot, however, always take care of the wide variety and forms that the suppression of minority interests may assume. The common law is hesitant about interfering with the internal business affairs of the corporation and contractual arrangements may be inadequate due to the inherent inability of the human mind to foresee every future contingency. Market forces may also not always operate unimpeded. Therefore, corporate statutory provisions such as the derivative action, windingup on the just and equitable ground and oppression and appraisal remedies have been introduced to supplement the common law, contractual mechanisms and market forces in the interest of the protection of minority shareholders. The provisions of these statutory remedies enable minority shareholders to either prevent the threat or rectify the abuse of corporate power. However, most of these corporate statutory remedies are surrounded with procedural requirements and other technicalities, which may diminish their utility as productive weapons available to minority shareholders. In this work, I propose to study the needs that gave rise to the various statutory remedies and the adequacy of these remedies made available to minority shareholders in British Columbia companies with particular reference to the responses of the common law, the legislature and the judiciary. Finally, I will study the possibility of borrowing these remedies from the British Columbia Company Act as models for the revision of the Bhutan Company Act which does not presently have such remedies.

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